Container Store Chief Weighs an IPO

Onetime department-store salesman Kip Tindell and his ex-boss raised $35,000 from family and friends to open their first Container Store location in Dallas in 1978. Some of their associates balked at the idea that the pair would be able to build a lasting, profitable business selling empty boxes and shelves.

But Mr. Tindell and Garrett Boone honed their vision, asking their staff to offer tips, such as how to straighten out a messy closet or an unruly toy collection, so shoppers would feel good about getting their lives in order.

Now, Container Store Inc., based in Coppell, Texas, operates 59 locations and booked $707.5 million in 2012 sales. Nearly six years ago, its founders and other investors sold a majority stake in the retailer to Leonard Green & Partners LP, a Los Angeles-based private-equity firm with investments in Sports Authority Inc. and Petco Animal Supplies Inc.

In a recent interview with The Wall Street Journal, Mr. Tindell, the chain's 60-year-old chief executive, discussed his vision for its continued growth, and said the company is considering an initial public offering, a move he says might help it put equity in the hands of some of its 6,000 employees. Leonard Green declined to comment. Edited excerpts:

WSJ: Why an IPO?

Mr. Tindell: We expect some type of transaction in the future, either public or private, because we are owned by a private-equity firm and it's been over five years.

If we ever go public, it's much easier to get stock in the hands of employees, which is something I'm passionate about. People can't ever do that well financially just on compensation. Financial independence comes from equity.

In a publicly traded company, stock dilutions are a standard operating procedure, but it's hard to grasp in a private company Even though partners and early investors agree in principle on giving employees more equity, they often change their minds when it comes time to dilute their own stakes in the company.

At Whole Foods [co-founded by one of Mr. Tindell's college roommates, John Mackey], once employees work 6,000 hours, they start getting stock options. I love that. I would want to do more of that if we do go that [IPO] route.

WSJ: You're known for holding lots of meetings. Why?

Mr. Tindell: We want meetings to include more people, not less, from all parts of the company. This "whole brain" approach allows a logistics person to solve a merchandise problem. You can't meet with the same people every week and expect innovation.

WSJ: With more people shopping online, and on mobile phones, how do you provide good customer service?

Mr. Tindell: That's an uphill battle. I don't know any online store that can top the human interaction of a bricks-and-mortar store.

We try to match the customer service online: Our live chat and call centers are staffed with well-paid and well-trained people in our home office, with 10 to 15 years of experience, instead of new or off-shore employees. They know 1,000 different ways to use a dairy crate.

WSJ: What advice do you have for someone looking to start a retailer today?

Mr. Tindell: Consumers today want to feel emotional about what they are buying.

We talk about getting the customer dance. They are so thrilled with their new pantry, they just have to show it to a sister or neighbor. That's how you differentiate and get people to come back.

WSJ: Retailers often have high employee turnover. What's your strategy for retaining employees?

Mr. Tindell: People join this company and never leave: The turnover rate is 5.7%. We invest an average 263 hours in employee training, compared with eight hours at most retailers. Full-time salespeople earn an average $48,000 a year, double the industry average.

If you take better care of your employees, they will take better care of your customers.

Economist Milton Friedman said the only reason firms exist is to maximize shareholder return. It's a commonly held belief, but it's wrong. If employees aren't happy, customers aren't happy and then shareholders won't be happy. We have to invert the pyramid—a theory we call "Conscious Capitalism."

[But] we're very clear that not everyone fits into this quirky company. We put potential hires through seven to eight interviews. Sometimes people look at us like we're crazy and run away. When employees don't understand the team atmosphere, we let them go just like in any other business.

WSJ: What is the biggest problem retailers face?

Mr. Tindell: The global economy is so volatile, you have to be an expert in macroeconomics just to organize closets. How can I know how many more people to hire or how much to spend on technology investments if I don't know if the economy is getting ready to head into a double-dip recession? The government is much less capable and moderate than it was when I was starting out.

WSJ: What's next ?

Mr. Tindell: Someday we will open stores internationally. Right now we are running as fast as we can to open stores in smaller metro areas, like Indianapolis and Nashville. They are almost as profitable as stores in Los Angeles and New York, but less expensive to build.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.